Yes, Missouri Taxpayers Will Bail Out Public Pensions

Missouri made small changes in 2010 to new state employee pension plans in an attempt to lower costs. But small changes are not enough to avoid a pension crisis.

Last week, the board of the Missouri State Employees Retirement System approved a 20 percent increase (from $274 million to $330 million) in pension costs to the state. This increase will go into effect next year. Missouri will either have to cut funding in other areas to fit this into the budget, or increase taxes.

Tax money and investment income provide a majority of the state pension system’s funding. Forecasted investment growth rates have been too high, especially during the recent economic downturn. This means that there have been unrealistic high expectations of the amount of investment income the pension plans would receive. Now, taxpayers are stuck with the bill to make up for lower than anticipated investment income.

The $330 million cost to Missouri is a clear sign that further reform to the state pension system is needed.